Oxiana reduced to Xstrata's wallflower

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Xstrata has left the door open on a possible $2 billion-plus bid
on Oxiana after slapping down $US1.7 billion ($2.2 billion) to
snare effective control of Canada's biggest mining company,
Falconbridge.

Falconbridge is Xstrata's second choice for a major acquisition
in the copper and nickel industries following Xstrata's loss to BHP
Billiton in the battle earlier this year for WMC Resources.
Somewhat ironically, speculation of BHP being interested in Oxiana
has now bobbed up.

But news of Xstrata's Falconbridge grab in the dying minutes of
yesterday's trading saw Oxiana give up some of its recent heady
share price gains, falling 3c to $1.215 and quoted in the
after-market at $1.20 on the basis that if Xstrata did have designs
on the group, nothing is imminent.

BHP won the WMC battle with its knock-out bid of $9.2 billion,
leaving the acquisitive Zug-based Xstrata to chase up what its
chief executive, Mick Davis, said at the time were two new ventures
- one more exciting than WMC and one more do-able.

Falconbridge could fall into either category.

Xstrata's power grab at Falconbridge comes from an agreement to
buy a 19.9 per cent stake from Canadian asset manager Brascan
Corp.

Falconbridge is this year's combination of the old nickel
producer by the same name and its major shareholder, and the more
diversified Noranda. The combination followed last year's failed
attempt by China Minmetals to take control of Noranda and before
that, talk that Brazil's iron ore king, CVRD, had Noranda in its
sights.

Xstrata said last night the Falconbridge acquisition did not
oblige Xstrata to make an offer to the other shareholders of
Falconbridge.

"Xstrata continues to review other growth options not associated
with Falconbridge, and the possibility of any future offer to the
other Falconbridge shareholders will be assessed in the light of
these opportunities, the prevailing market environment and other
factors," Mr Davis said.

Those comments were taken in the local market to mean that the
much-rumoured assault on Oxiana remained a possibility although
Oxiana continues to report that it is not in discussions with any
party nor has it been approached. Xstrata traditionally likes to at
least start out its acquisitions on a friendly basis.

While much of the speculation on a bid for Oxiana emerging has
centred on Xstrata, it was BHP that was most mentioned yesterday by
the rumour mongers.

The idea was that Oxiana's yet-to-be developed Prominent Hill
copper/gold deposit near Olympic Dam has growing strategic appeal
to BHP.

Prominent Hill also has a shorter development timetable than the
expansion that first WMC and now BHP plans for Olympic Dam. But
analysts pointed out that if BHP wants access to Prominent Hill
concentrates, all it has to do is negotiate a supply contract.